The reality behind the predictions of Y2K disaster

I have read many predictions about what could and will happen. I am running a Y2K project so I have heard a number of stories myself. I only have knowledge of a few concrete Y2K problems that were either avoided or corrected. Some authors turn to statistics to bolster and prove their points. It is possible to examine code, look at embedded systems, ask manufacturers and get some idea of the problems. It would then be possible to say, this or that will occur unless it is fixed. What are the facts as you know them?

Answers

Hey Stephen,

I think you'll get all those concrete answers you're looking for in the days and weeks after January 1, 2000. Before then, I seriously doubt that anyone will perform an in-depth analysis of every existing computer program, or check all 25 Billion microchips in use. So if it's reality you want, just be patient. You'll get a good dose of it in the next 18-24 months.

Stephen, in answer to what would happen if things are not fixed, let's look at only one sector - finance:

On April 2, speaking to the American Society of Newspaper Editors, Alan Greenspan said that the Fed's efforts to head off a meltdown of the nation's banking system at the turn of the century are on track. Therefore, we have the word of the chairman of the Fed that there will be a meltdown if it is not fixed.

The Institute of International Finance warned in a report on April 6 that if only a few of the international players are not ready, that could cause havoc in the financial industry around the world. They warned that European (because of conversions to the euro in Europe) and Japanese institutions are the ones most at risk to fail the transition. They also pointed out three main risks: liquidity risks (funds flows being interrupted), credit risk (major client's inability to meet debt-service obligations) and legal risk (including the risk of shareholder lawsuits for failing to disclose the potential liabilities of Y2K problems). Among the task force members describing these potentially catastrophic problems were Credit Suisse First Boston, Deutsche Bank AG, Royal Bank Financial Group, the Securities Industry Association and Swiss Bank Corp.

On April 7, Dr. Edward Yardeni, Chief Economist for Deutsche Morgan Grenfell, a world renowned economic forecaster, said in a speech to the Bank for International Settlements (the central bankers central bank), "Let's stop pretending that Y2K isn't a major threat to our way of life. There is too much at stake for such uninformed wishful thinking". He also said "You are in a poition to prepare the world for the coming upheaval.". Also "The division of labor could be radically upset by Y2K. This process is the very foundation of economic prosperity and progress...". And "The current Y2K global battle plan is virtually guaranteed to fail..."

All that warning of calamity came in only the last two weeks. On how much better authority to you want to hear it that the financial systems of the world are at serious risk of collapse?

It is an absolute certainty that the accounts-payable and accounts-receivable systems used by my company will catastrophically fail by October '98 due to Y2K issues. Multi year cyclicals have already failed. It is possible that we can fix it. It is possible that we can remediate. But failure is certain if we do not act.

Given what I have already looked at for other companies, I am fairly sure that most are in similar situations. Some have only begun to take a real look. I know that several banks are in situations as bad as the one I face. The interbank payment system is thus in trouble.

To plan based only on certain knowledge would be short sighted. Plan, at least partly, on the possible and probable impacts. Take the prudent classic risk management steps that all project planning would suggest is appropriate. DO NOT ASSUME it won't happen if you don't have proof that it will.

Pray to God for help and take all prudent action to prepare. Something very bad is about to happen.

Quoting Caspar Weinberger in Forbes Magazine commentary online "The Y2K Crisis" dated for publication on April 20, 1998, "The [federal] committees were also told by the General Accounting Office that it is unlikely that the remaining 5,000 'mission-critical' systems can be corrected in time. . .There are about 60,000 'non-mission-critical' federal systems that also need saving."

Quoting GAO publication GAO/AIMD-10.1.19, "Year 2000 Computing Crisis: Business Continuity and Contingency Planning", page 2, "Time is running out for solving the Year 2000 problem. Many federal agencies will not be able to renovate and fully test all of their mission critical systems and may face major disruptions in their operations."

Fact is, Stephen, that even if your systems are bullet proof, you and your company are going to be directly and indirectly impacted by the results of multiple breakdowns in both domestic and global, public and private, economic and social sytems of communication and trade that all rely on complex, interconnected exchanges of electronic data.